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What Is The Concept Of Demat Shares?

Concept Of Demat Shares?

by ninachohan
Demat account

Demat i.e. dematerialised shares is referred to the concept of converting physical copies of share certificates into electronic or digital form.

If you want to dematerialise your physical shares to digital ones, you need to open a Demat account. Your shares will be held in the Demat account and you can also use this account to buy and hold other securities such as mutual funds, currencies, commodities, etc. There are several benefits of having a Demat account. Some of the key benefits are given below:

Beneficial for investors, brokers, and companies

A Demat account is helpful for investors, brokers, and companies in which you invest money. As an investor, it is beneficial for you as it eliminates the risks involved in the storage of physical share certificates. Digital securities are neither prone to damage nor can be stolen. Also, as it allows you to participate in trading in real-time, the issues like delayed settlement are automatically eliminated. As a result, you are able to trade freely and earn high profits. 

With Demat account, anyone can participate in trading from anywhere. This increases the participation in stock market trading which helps the brokers in earning more commissions or brokerage. 

Companies are able to issue their stocks easily through a Demat account. Also, as they don’t have to issue stocks in physical form, their expenses are also reduced to some extent. 

Time-saving

A Demat account reduces the time involved in carrying out certain procedures like buying, selling, and transfer of shares. It is because you don’t have to consult a broker by phone and go to his office to take delivery while buying or selling shares. Transferring shares from one account to another can also be done seamlessly through a Demat account. 

Once you sell stocks, the funds are immediately available as a margin in your Demat account. You can use this margin to take new trades or positions. Also, after selling your stocks in real-time, the money gets transferred to your account in T+2 days. After that, you can withdraw this amount to your bank account and the money will be reflected in your bank account within 24 working hours. Therefore, a Demat account also provides high liquidity to the investors. 

Loan against securities 

You can apply for a loan against the securities that you hold in your  account. In this case, you need not provide any other collateral as the loan applicable is approved against the shares in your account are considered. The dividends and other benefits provided by the stock companies will be provided to you even after availing of the loan. 

How to open a Demat account?

To open a Demat account online, you can follow these steps:

  • Step 1: Visit the online website of the brokerage company in which you are planning to open a account. 
  • Step 2: Fill out an online application form with all your details. Submit documents like PAN Card, Aadhaar Card, etc. to validate your address and identity. You will also have to provide some of your financial documents like Form 16 to submit evidence of income. 
  • Step 3: Finally, you need to upload your photograph and digital signature online. The Demat account will be opened after verification of your documents, and you will get the login credentials on your registered email address. 

After opening a Demat account, you can start investing in the stock market. it is because most brokers offer a 2-in-1 account that also includes both trading account and Demat account. However, ensure that the trading platform you choose charges minimal brokerage, account maintenance charges, and other fees. 

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